Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |8189 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 01, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Jul 01, 2024Hindi
Listen
Money

My Father has purchase a property for rs 2lakh in year 1994.and my Father did this property registration in amnesty scheme in year 2008.and after that my Father died in year in December 2014.and after that I made a release deed in may 2024.and transfer this in my name(son). And I sold this property (residential) for rs 30lakh in year 2024 June month. In this case I want to know is there any capital gain is there or not.

Ans: let’s work through the details of your capital gain calculation step by step and discuss the tax implications. Here’s a detailed answer to your query:

Calculating Capital Gains on Sale of Property
Understanding Key Terms
Cost of Acquisition: The original price paid for the property, which is Rs. 2 lakh in 1994.
Indexed Cost of Acquisition: The cost of acquisition adjusted for inflation using the Cost Inflation Index (CII).
Sale Price: The price at which the property was sold, which is Rs. 30 lakh in 2024.
Cost Inflation Index (CII)
The Cost Inflation Index (CII) is used to adjust the purchase price of the property for inflation. Here are the relevant CII values:

1994-95: 259
2008-09: 582 (year of registration under amnesty scheme)
2014-15: 1024 (year of your father's death)
2023-24: 348 (assumed latest CII for calculation purposes)
Step-by-Step Calculation
Determine the Year of Acquisition for Indexation Purposes:

Since the property was registered under the amnesty scheme in 2008, we use 2008 as the base year for indexation purposes.
Calculate Indexed Cost of Acquisition:

The original cost of acquisition (in 1994) is Rs. 2 lakh.
The CII for 2008-09 is 582, and for 2023-24, it is 348.
Indexed Cost of Acquisition = (Cost of Acquisition) * (CII of the year of sale / CII of the year of acquisition).
Indexed Cost of Acquisition = Rs. 2,00,000 * (582 / 348).
Calculate Capital Gain:

Sale Price: Rs. 30 lakh.
Capital Gain = Sale Price - Indexed Cost of Acquisition.
Calculations
Indexed Cost of Acquisition
Indexed Cost of Acquisition = Rs. 2,00,000 * (582 / 348) = Rs. 2,00,000 * 1.6724 = Rs. 3,34,480

Capital Gain
Capital Gain = Sale Price - Indexed Cost of Acquisition

Capital Gain = Rs. 30,00,000 - Rs. 3,34,480 = Rs. 26,65,520


Tax Implications
Capital gains tax on the sale of a residential property is typically categorized as long-term capital gains (LTCG) since the property was held for more than three years. The LTCG tax rate is usually 20% with indexation benefits. Here's a more detailed breakdown:

Long-Term Capital Gains Tax (LTCG):

The LTCG on the sale of a residential property held for more than three years is taxed at 20% after indexation.
Calculation of LTCG Tax:

LTCG = Rs. 26,65,520
LTCG Tax = 20% of Rs. 26,65,520 = Rs. 5,33,104
Reducing Tax Liability
To reduce your tax liability, you can consider the following options:

Investing in Capital Gains Bonds:

You can invest up to Rs. 50 lakh in specified bonds under Section 54EC to save on LTCG tax. These bonds have a lock-in period of five years and provide a safe investment option with tax benefits.
Investing in Residential Property:

Under Section 54, you can reinvest the capital gains in purchasing or constructing another residential property. This needs to be done within two years of the sale of the property or within three years if constructing a new house. This exemption is available if the new property is not sold within three years from the date of purchase or construction.
Setting Off Losses:

If you have any other capital losses, you can set them off against these gains to reduce your taxable amount.
Steps to Follow
Calculate Your Exact Tax Liability:

Use the above formulas to compute the exact LTCG and the corresponding tax.
Plan for Tax-Saving Investments:

Decide whether to invest in capital gains bonds or a new residential property to save on LTCG tax.
Consult a Certified Financial Planner (CFP):

A CFP can provide personalized advice tailored to your financial goals. They can help in selecting the right tax-saving investments and strategies to optimize your tax liability.
Final Insights
To summarize, you have made a significant capital gain of Rs. 26,65,520 from the sale of your property. This gain will be subject to long-term capital gains tax, typically at a rate of 20% after indexation. However, by strategically planning your investments, you can reduce your tax liability significantly. Consider investing in Section 54EC bonds or another residential property to avail of tax exemptions. Regularly consult with a Certified Financial Planner to ensure your financial decisions align with your long-term goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |8189 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 19, 2024

Listen
Money
My Father has purchase a property for rs 115000 in year 1994.at Bhayandar west district Thane at Maharashtra state.and my Father did this registration in amnesty scheme in year 2008.and after that my Father died in year 2014.and after I made a release deed transfer this property in my name (son). I sold this residential property in June 2024for rs 30lakh.in this case I want to know the status of capital gain is there or not I also want to know if I sell this residential property .I can purchase ashop or not. If I want to save capital gain what is the solution to save my tax. Thanking u.
Ans: You sold a property in June 2024 for Rs 30 lakh. It was bought for Rs 1,15,000 in 1994. Let's evaluate if there's a capital gain.

Indexed Cost of Acquisition

The property purchase cost will be adjusted for inflation. This is called the Indexed Cost of Acquisition (ICA). The ICA is calculated using the Cost Inflation Index (CII) provided by the Income Tax Department.

Calculating Indexed Cost

Calculate the ICA to understand your capital gain. Since we won't use specific formulas here, you can consult a Certified Financial Planner to get the precise ICA value. This helps in determining the exact capital gain.

Long-Term Capital Gains (LTCG)

Since you held the property for more than 24 months, it is classified as a long-term asset. The profit from the sale, after adjusting for the ICA, is your Long-Term Capital Gain (LTCG).

Tax on LTCG

LTCG is taxed at 20% with indexation benefits. However, there are ways to save on this tax.

Investing in Another Property

You can save on capital gains tax by investing in another residential property. This is covered under Section 54 of the Income Tax Act. If you buy a residential house within two years or construct one within three years, you can claim exemption.

Investing in Capital Gains Bonds

Another option is to invest in Capital Gains Bonds under Section 54EC. These bonds have a lock-in period of five years and provide tax exemption on the gains. The maximum investment limit in these bonds is Rs 50 lakh.

Purchasing a Shop

Buying a shop will not provide capital gains tax exemption under Section 54. The exemption is only for residential properties. If you sell a residential property, you must reinvest in a residential property to save on capital gains tax.

Other Options to Save Tax

Residential Property: Invest in another residential property within two years.

Construction: Construct a new house within three years.

Capital Gains Bonds: Invest in these bonds within six months of the sale.

Final Insights

To save on capital gains tax, reinvest in a residential property or Capital Gains Bonds. Purchasing a shop will not help in saving tax on capital gains. Consulting a Certified Financial Planner can help you navigate these options efficiently.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8189 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 24, 2024

Listen
Money
SIR, I PURCHASED ONE PROPERTY ON 5.2.2013 FOR RS. 4,50,000/- AND SOLD THE SAME PROPERTY ON 6.10.2023 FOR RS. 19,45,000/- WHAT WILL BE THE CAPITAL GAIN.
Ans: Calculation of Capital Gain

1. Determine the Purchase Price:

You purchased the property for Rs. 4,50,000.

2. Determine the Selling Price:

You sold the property for Rs. 19,45,000.

3. Calculate the Capital Gain:

Capital gain is the difference between the selling price and the purchase price.

4. Adjust for Inflation:

Since the property was held for more than two years, it qualifies as a long-term capital asset. To calculate the long-term capital gains (LTCG) accurately, adjust the purchase price for inflation using the Cost Inflation Index (CII). This adjustment helps account for the inflation impact over the holding period.

5. Long-Term Capital Gains Tax:

For properties held long-term, the LTCG tax rate is 20% with indexation benefits. This means you pay tax on the gains after adjusting for inflation.

Detailed Calculation:

Purchase Price: Rs. 4,50,000
Selling Price: Rs. 19,45,000
Capital Gain: Selling Price - Purchase Price = Rs. 19,45,000 - Rs. 4,50,000 = Rs. 14,95,000
After adjusting the purchase price for inflation using the CII, calculate the actual taxable gain. The tax is computed at 20% on the adjusted gain.

Final Insights

You have made a significant gain on your property. The total capital gain before indexation is Rs. 14,95,000. After adjusting for inflation, the taxable gain might be lower. The tax liability will be 20% on the adjusted gain. It’s advisable to consult a Certified Financial Planner or a tax expert to ensure accurate calculations and to explore possible exemptions or deductions that might be available to you.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Vivek

Vivek Lala  | Answer  |Ask -

Tax, MF Expert - Answered on Aug 11, 2024

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8189 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 04, 2025

Asked by Anonymous - Apr 03, 2025Hindi
Listen
Money
Dear Sir, I am a 55-year-old corporate executive retiring by 2029. My corpus is as follows - PF = 45,00,000. PPF = 3200,000. NPS = 35,00,000 (with a monthly investment of 30k). Property = 4 crores. Shares + MF = 32,00,000 (with monthly investment of around 60,000). LIC = 14,00,000 (maturing next year). FDs = 36,00,000. Apart from the above, there would be Gratuity (15 lac) and jewellery. My 2 children would be needing around 25 lac for their education spread over the next 4 years. Can I take early retirement.
Ans: Your financial position is strong. You have built a solid corpus across multiple asset classes. Below is a detailed assessment of your readiness for early retirement.

Assessing Your Financial Position
Retirement is in 2029, meaning you have five more years of income and investments.

Your total corpus is well-diversified across PF, PPF, NPS, MFs, shares, FDs, and property.

You have a healthy investment habit with a Rs 60,000 monthly SIP and Rs 30,000 into NPS.

LIC maturity next year will provide Rs 14 lakh, adding to liquidity.

Gratuity of Rs 15 lakh will come at retirement, increasing your cash reserves.

Jewellery is additional wealth but is not an income-generating asset.

Financial Needs & Future Goals
1. Children’s Education – Rs 25 Lakh Needed in 4 Years
You need Rs 25 lakh over four years for education expenses.

Your FDs (Rs 36 lakh) can help cover this without disturbing your investments.

Consider a laddering approach for FDs to match the education payment timeline.

2. Regular Income Post-Retirement
Your NPS corpus (Rs 35 lakh) will generate a pension post-retirement.

EPF (Rs 45 lakh) and PPF (Rs 32 lakh) provide lump-sum retirement funds.

MFs & Shares (Rs 32 lakh) with Rs 60K SIP will continue to grow.

You have a strong base for passive income but need an income plan.

3. Healthcare & Emergency Fund
At 55 years, medical expenses will rise over time.

Ensure you have adequate health insurance for post-retirement years.

Keep at least Rs 15-20 lakh in liquid FDs or debt funds for emergencies.

Assessing Early Retirement Feasibility
1. Corpus Growth Over the Next 5 Years
Your existing investments + SIPs + NPS contributions will grow further.

With proper asset allocation, your corpus can cross Rs 5-6 crore in five years.

2. Inflation & Lifestyle Maintenance
Your current lifestyle expenses should be estimated.

Factor in inflation (6-7% per year) to assess long-term sustainability.

3. Investment Strategy for Stability
Shift some equity to balanced funds for stability closer to retirement.

Keep a mix of growth & conservative investments for steady returns.

Avoid full withdrawal of NPS—use a mix of systematic withdrawal & pension.

Final Insights
You have a strong corpus and are on track for retirement.

Continuing work for five more years will provide financial security.

Asset allocation adjustments will ensure income stability post-retirement.

Plan for rising medical costs & inflation for a stress-free retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8189 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 04, 2025

Listen
Money
Dear Sir, I am 59 years old salaried person, doing SIP Axis midcap @5K, Axis ESG @5K, Parag Parikh Flexicap @25K, Nippon Multicap @7.5K Nippon Smallcap@5K, SBI Smallcap @4K and Canara Smallcap @3K per month from last four years. The SIP is to be continued for another five years. In context of the present market volatility, will you please review my portfolio? I am not risk averse. Goal is wealth creation.
Ans: Your investment strategy is well-structured. You have a strong focus on wealth creation, and your portfolio reflects that. Below is a detailed review with recommendations.

Assessing Your Existing Portfolio
You have a well-diversified equity portfolio with mid-cap, small-cap, flexi-cap, ESG, and multicap funds.

The majority of your investments are in aggressive-growth categories.

Your risk-taking ability is clear from the allocation to small and mid-cap funds.

You have been investing consistently for four years, which is a good approach.

Your SIPs are planned for another five years, giving your investments time to grow.

Strengths of Your Portfolio
Growth Potential: Small and mid-cap funds have higher return potential over the long term.

Diversification: Investing across categories helps balance risk and return.

Flexibility: The flexi-cap and multicap funds allow fund managers to switch between market caps.

Consistency: Regular SIPs reduce the impact of market volatility.

Key Areas for Improvement
1. High Exposure to Small & Mid-Cap Funds
Your portfolio has a strong tilt towards small and mid-cap funds.

These funds can be volatile, especially in uncertain markets.

A slight reallocation towards large-cap funds can add stability.

2. Sector-Specific Risk in ESG Fund
ESG funds are theme-based and depend on specific regulatory and global trends.

This can lead to underperformance if ESG sectors face downturns.

Consider reducing exposure to ESG or tracking its performance closely.

3. Overlapping Investment Strategies
Some of your funds may have similar stock holdings, leading to duplication.

Too many funds in the same category do not always mean better diversification.

A focused approach with fewer but well-selected funds may work better.

Recommended Portfolio Adjustments
1. Reduce Small-Cap Exposure
You already have multiple small-cap funds.

Retaining one strong performer and reducing others can improve risk management.

The freed-up capital can be shifted to large-cap or balanced funds.

2. Increase Large-Cap Allocation
Large-cap funds provide stability and steady growth.

A 15-20% allocation in a strong large-cap fund can improve balance.

This will ensure that your portfolio withstands short-term market fluctuations.

3. Monitor ESG Fund Performance
ESG funds have a unique investment strategy.

If the performance is inconsistent, switching to a flexi-cap or multicap fund may be better.

Managing Market Volatility
SIP Continuation: Continue your SIPs as planned to benefit from rupee cost averaging.

Rebalancing: Adjust allocations annually based on market conditions.

Profit Booking: Consider partial withdrawals in strong market phases.

Taxation Considerations
Equity Mutual Funds: LTCG above Rs 1.25 lakh is taxed at 12.5%. STCG is taxed at 20%.

Reallocation Impact: Switching funds may lead to taxable capital gains.

Tax-Efficient Withdrawals: Plan redemptions to minimize tax liability.

Final Insights
Your portfolio is well-structured for wealth creation.

Reducing small-cap exposure and adding large-cap stability can improve balance.

Regular monitoring and minor adjustments will keep your investments on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8189 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 04, 2025

Asked by Anonymous - Apr 03, 2025Hindi
Listen
Money
Hi Sir, I'm(33yo /M) looking for guidance on investing rs6 lakhs from my gratuity. I've a diversified portfolio including debt, equity and gold. I'm aiming for growth over a 3-4 year timeframe,(aggressive mindset) but I'm also mindful of the current equity market risks. Could you pls advise investment options that align with my risk tolerance and growth objectives? (Prefer: Gold or Equity Market)
Ans: Your investment approach is clear and well thought out. Since you prefer gold and equity, and have an aggressive mindset, let's structure your Rs 6 lakh investment accordingly. Below is a detailed analysis to help you make informed decisions.

Understanding Your Investment Horizon and Risk Tolerance
Your 3-4 year time frame suggests that you need liquidity within a relatively short period.

Since you are open to high risk for growth, equity-heavy investments suit your needs. However, market volatility can impact returns in the short term.

Gold can act as a hedge against market downturns but may not provide significant growth over such a short period.

Suggested Investment Allocation
1. Equity Mutual Funds – 60% Allocation (Rs 3.6 lakh)
Actively managed equity funds can deliver strong returns over your time frame.

Large and mid-cap funds offer a balance of stability and growth.

Small-cap funds can provide high returns but come with higher risk.

Sectoral and thematic funds can be considered, but they require close monitoring.

Investing in a mix of these categories can optimize risk and return potential.

2. Gold Investment – 25% Allocation (Rs 1.5 lakh)
Gold can act as a safeguard against equity market fluctuations.

Gold ETFs or sovereign gold bonds (SGBs) are preferable to physical gold due to ease of liquidity and additional interest in SGBs.

Gold prices can be volatile in the short term, so a 3-4 year horizon may not always guarantee high returns.

3. Balanced Hybrid Mutual Funds – 15% Allocation (Rs 90,000)
Hybrid funds blend equity and debt to reduce risk while offering reasonable growth.

They are useful for managing market volatility over a 3-4 year period.

Dynamic asset allocation funds adjust between equity and debt based on market conditions.

Factors to Consider While Investing
1. Equity Market Risks
The stock market can be unpredictable, especially in the short term.

Staying invested for at least 3-4 years can help ride out market fluctuations.

Avoid timing the market. Staggered investment through SIPs may reduce risk.

2. Gold Market Trends
Gold prices depend on global economic factors and inflation trends.

A 3-4 year horizon may not always align with gold’s long-term growth pattern.

Diversifying within gold (SGBs, ETFs) can enhance liquidity and returns.

3. Liquidity Considerations
Equity mutual funds offer high liquidity but can be affected by short-term volatility.

SGBs have a lock-in period, but early exit options exist after five years.

Balanced hybrid funds provide moderate liquidity with reduced volatility.

Taxation Impact on Your Investments
Equity Mutual Funds: LTCG above Rs 1.25 lakh is taxed at 12.5%. STCG is taxed at 20%.

Gold Investments: Taxation depends on whether you invest in physical gold, ETFs, or SGBs.

Hybrid Funds: Tax treatment depends on the equity-to-debt ratio of the fund.

Consider tax-efficient withdrawals if you plan to redeem funds within 3-4 years.

Final Insights
A mix of equity, gold, and hybrid funds aligns with your aggressive growth objective.

Diversification can help manage risk while maximizing potential returns.

Monitor your investments regularly and adjust if needed based on market conditions.

If liquidity is a concern, avoid investments with long lock-in periods.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x